MARKET WATCH: Crude oil prices slide on inventory build

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Aug. 27 -- Crude oil futures prices were down Aug. 26 on the New York market following a US Energy Information Administration report showing a slight build in oil inventories, countering analysts’ expectations for a stockpile decline.

Stephen Berman, senior research analyst with Pritchard Capital Partners LLC, said the crude inventory build was a disappointment. EIA reported Aug. 26 that commercial US crude inventories increased 200,000 bbl to 343.8 million bbl during the week ended Aug. 21.

Barclays Capital analyst Kevin Norrish noted that prices edged lower despite “mildly supportive” US economics.

Norrish noted that the refined products inventory shrunk to its lowest level since early May. EIA reported that gasoline stocks dropped 1.7 million bbl to 208.1 million bbl for the week ended Aug. 21. Distillate fuel inventories gained 800,000 bbl to 162.4 million bbl (OGJ Online, Aug. 26, 2009).

“Drawdowns in jet fuel and residual fuel oil contributed while diesel remained the major source of product overhang,” Norrish said. “However, we do think that US diesel demand has now bottomed at a low level, and that the turning of the final goods inventory cycle means that demand prospects are now distinctly more promising.”

Forecasters watching Danny
Tropical Storm Danny is expected to strengthen into the season’s second hurricane within a few days and to skirt the US East Coast.

The US National Hurricane Center said Danny was about 575 miles south-southeast of Cape Hatteras, NC, as of 8 a.m. EDT Aug. 27 with winds near 60 mph.

NHC urged residents and tourists in the Carolinas north to New England to closely monitor the storm’s progress.

Several storm forecasting organizations have projected storm tracks in which Danny’s path will miss Gulf of Mexico oil and gas operations.

Pritchard Capital’s Berman said the storm “should not significantly impact the US energy complex, but it does serve as a reminder that it is the middle of storm season.”

Energy prices
The October contract for benchmark US light, sweet crudes dropped 62¢ to $71.43/bbl Aug. 26 on the New York Mercantile Exchange. The November contract fell 59¢ to $72.19/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 12¢ to $71.43/bbl. Heating oil for September lost 0.39¢ to $1.85/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month declined 2.44¢ to $1.98/gal.

The September natural gas contract rose 2.8¢ to $2.91/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., dipped 11¢ to $2.765/MMbtu.

In London, the October IPE contract for North Sea Brent crude lost 17¢ to $71.65/bbl. Gas oil for September was down $22.25 to $580.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes dropped $1.27 to $70.44/bbl on Aug. 26.

Contact Paula Dittrick at paulad@ogjonline.com.

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